Currency

Yen (¥)

The government has been proactive when it comes to intervening in the currency markets, although have not intervened of late. They are quick to threaten intervention however, when the yen climbs to a level the Ministry of Finance thinks is too high. They want to make sure that the yen remains relatively cheap so that exporters to the United States and elsewhere will continue to benefit because of lower prices and be able to bring home higher profits besides. Increasing spreads between Japan’s low interest rates and those in most other countries have stimulated carry trades. This is where investors borrow in low interest rate countries such as Japan and then invest these funds in higher interest-paying countries such as Australia and New Zealand along with many of the emerging countries. When investors become risk averse, the trades reverse themselves and the yen rises in value.